The Executive Board of the International Monetary Fund (IMF) on Monday approved a $47.1 million loan for The Gambia under a 39-month extended credit facility (ECF), meaning the West African country can request for the gradual disbursement of cash within that time frame as it stabilizes its economy amid challenges from COVID-19 pandemic.
An extended credit facility (ECF) allows the borrowing country to take out money over an extended period of time rather than reapplying for a loan each time it needs money. It is a loan and not a gift. Neither the IMF nor the country often disclose the terms of repaying the debt.
The IMF Executive Board decision enables an immediate disbursement of about $6.7 million. Disbursements of the remaining amount will be phased over the duration of the program, subject to six half-yearly reviews.
“The Fund-supported program aims to help The Gambia to be better prepared for external shocks, pursue high and inclusive growth, lessen debt vulnerabilities, strengthen public financial management, and bolster domestic revenue mobilization,” the IMF said in a statement in Washington DC on Friday.
“The ECF arrangement is essential to help the authorities deal with the challenges posed by the coronavirus disease (COVID-19) pandemic,” it added.
Mr Tao Zhang, a Deputy Managing Director and Acting IMF Chair, described The Gambian economic growth as robust but threatened by the fast spreading COVID-19 pandemic.
“The Gambian authorities’ commitment to prudent policies and institutional improvements has supported robust economic growth, while voluntary debt service deferrals from their main external creditors have helped attain debt sustainability.
“However, the ongoing COVID-19 pandemic will challenge the authorities’ efforts to further strengthen economic performance and resilience. The 39-month ECF arrangement, focused on advancing reforms in revenue mobilization, public financial management, and economic governance to support inclusive growth, will help anchor macroeconomic stability and meet balance-of-payments needs. Grant financing and technical assistance from development partners will be needed to support the authorities’ reform efforts,” he said.
Zhang said The Gambian authorities should remain committed to fiscal consolidation in the medium-term to ensure debt sustainability as well as enhanced monetary policy framework
“Major projects should be financed through grants or highly concessional financing and public procurement and project selection should be strengthened. The governance and financial management of state-owned enterprises need to be improved to help reduce fiscal risks and enhance efficiency in public service delivery. Further strengthening of tax administration and public financial management is also needed to boost resources for priority investment and social spending.
“The monetary policy framework needs to be enhanced, including by gradually adjusting the interest rate corridor, and enabling the SDF rate to effectively anchor the functioning of the interbank market, and the central bank’s balance sheet should be strengthened,” he said.
According to Zhang, the vulnerabilities identified in the 2019 Financial Sector Stability Assessment should be addressed to ensure soundness of the financial sector and improve legal and supervisory framework for banking supervision.
“The authorities should leverage the financial inclusion strategy, including through mobile banking, while strengthening the oversight of non-banking institutions and monitoring of risks involved in mobile banking.
“The authorities’ support for social programs and commitment to structural reforms and improvement in governance, as outlined in the authorities’ National Development plan, will be necessary to help address social needs, combat corruption and promote private-sector-led inclusive growth,” Mr Tao Zhang added.